Names across the travel industry have been sounding the alarm on a consumer slowdown, but the cruise industry seems to be defying that trend, as names like Carnival (CCL) and Royal Caribbean (RCL) boosted their annual forecasts on increased demand. Macquarie senior US lifestyle and payments analyst Paul Golding joins Market Domination to break down the state of the industry and his top cruise stock picks.

"Overall, cruise is a very forward-booked industry. They've noted across the sector that they've seen record volumes and at record prices. And this booking curve has become elongated. We've seen it go from 12 to 18 to 24 months. And so a lot of this spend has been pulled forward. The other dynamic that is keeping volumes afloat, so to speak, is that cruise is a value proposition to the traveling consumer. Cruise historically has been about a 25% discount versus land-based alternatives," Golding explains.

His top cruise stock pick is Royal Caribbean, on which he has an Outperform rating and a $189 price target: "RCL has managed the securitization basket, in our view, best out of the group through COVID. It just finished paying down its ship-related deferred debt from the COVID era. It's also met its trifecta goals or has visibility to meeting its trifecta goals, which were earnings goals and ROIC goals it set out a couple of years ago... it also is growing capacity, growing it faster than some of its peers." He anticipates an 8% capacity growth this year, followed by 5% in 2025 and 7% in 2026.

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This post was written by Melanie Riehl